WILLINGNESS TO RAISE REVENUE: Management has shown a willingness to take
advantage of its substantial taxing flexibility by increasing its O&M
levy in recent years to help balance financial operations and add to
reserves.

SERVICE AREA LINK TO INTERNATIONAL TRADE: The service area relies on
international trade activity due to its proximity to Mexico and an
extensive and expanding transportation network. Numerous completed or
planned major mobility projects should strengthen the county's
multi-modal transportation network, aiding trade activity, local
commerce, and tourism.

LOW WEALTH LEVELS; ELEVATED UNEMPLOYMENT: The county's wealth levels
remain well below average although are improving at rates that exceed
state and national averages. Employment and labor force continue to grow
but the unemployment rate remains well above the state and national
averages.

NO RATING DISTINCTION: No rating distinction is made between the
unlimited tax secured bonds and the limited tax bonds due to the
substantial margin remaining under the tax cap.

RATING SENSITIVITIES

RETURN TO STRUCTURAL IMBALANCE: Failure to maintain structural balance
and adequate financial reserves could lead to negative rating action.

CREDIT PROFILE

Cameron County is the southernmost county in Texas, and its largest
cities include Brownsville, Harlingen, and San Benito.

STABILIZED FINANCIAL PERFORMANCE

The county's revenue base is supported 60% by property taxes. The county
also benefits from toll bridge activity and fees from housing federal
inmates. The county's aggressive budgeting of these volatile revenues,
in part, led to structural imbalances pre fiscal 2011. While Fitch
believes the county is taking a more conservative approach, Fitch views
cautiously the budgeted increases in related revenues.

The county has posted two years of positive financial results since
restoring structural balance in fiscal 2011. The fiscal 2013 audit
yielded a large $4.4 million general fund surplus, equal to 6% of
spending, aided by a 20% increase in charges for services due to greater
than budgeted average daily population (ADP) of inmates from the U.S.
Marshall's Office (USMO). As a result, the unrestricted fund balance
increased to a solid $15.9 million or 21.7% of spending, in excess of
the county's 16% fund balance goal.

Unaudited fiscal 2014 results are also positive with a projected
operating surplus of $4.8 million or 6% of spending. If audited results
remain unchanged, the unrestricted fund balance will total a healthy
$20.7 million or 26% of spending. Positive fiscal 2014 operations were
aided by vacancy savings and a large 42% mid-year increase in the
approved per diem rate (now $51) for housing inmates from the USMO. Such
revenues accounted for a modest 8.6% of general fund revenues. The ADP
of USMO inmates totaled 350, about 21% of the jail's total capacity.
Fiscal 2014 revenues also benefited from an 8% hike in the international
toll bridge rate for autos, increasing the toll bridge transfer to $7.3
million or 9.3% of general fund revenues.

The fiscal 2015 budget is balanced and limits appropriation growth to 5%
over the previous year's budget. Charges for services are budgeted to
increase by 15% due primarily to the receipt of the higher jail per diem
for the full fiscal year. Most pay hikes were limited to a modest $500
plus a one-time compensation allowance of $1,000.

SERVICE AREA LINK TO INTERNATIONAL TRADE

The county's population continues to grow rapidly. Estimated 2015
population of 436,584 represents a notable 7.5% increase over the 2010
census level. Trade, manufacturing, and tourism are all major components
of the local economy.

Manufacturing plants are a significant factor on both sides of the
U.S.-Mexico border, with a major presence of maquiladoras, or twin-plant
manufacturers, in Matamoros, Mexico. The Port of Brownsville is an
important link with Mexico and affords the only entry point on the
border accessible by the four modes of transportation. Prominent tourist
attractions include South Padre Island (SPI) among others.

Income levels remain significantly below those of the state and U.S.
Unemployment remains elevated largely due to labor force growth
(averaging 1.8% per year since 2005) outpacing employment increases
(1.6%). The county's annual unemployment rate declined from 10.2% in
2013 to 8.5% in 2014, but remained well above the state's 5.2% and the
nation's 6.2% averages.

TAX BASE REMAINS SLUGGISH

Previously solid TAV growth flattened in recent years as a result of the
reduced building activity during the economic slowdown, although the
county has not experienced any declines in TAV. After declining notably
in recent years, home building permit activity is stirring again
although TAV grew only modestly in fiscal 2015 by 0.8%. Future plans by
the county's regional mobility authority (RMA) for a second causeway
bridge to SPI would likely lead to increased development on the northern
end of SPI.

Other RMA projects include a 10 mile toll road (SH 550) that will
connect Interstate Highway 69 (IH 69) and the Port of Brownsville. The
recent conversion of a local highway into IH 69 was designed to
facilitate international commercial traffic. The University of Texas
recently consolidated two existing campuses into The University of Texas
Rio Grande Valley and authorized it to build south Texas' first medical
school which will open in 2016.

SpaceX, a space transport services company, recently broke ground on a
$40 million commercial-only launch facility near Brownsville. SpaceX's
first launch from this location is scheduled in 2016. A 10-year tax
abatement agreement with the county requires SpaceX to employ at least
300 by 2024. Additional employment gains are expected from the
relocation of suppliers to the area. Up to 12 launches will be scheduled
annually and are projected by the county to further boost tourism.

HIGH DEBT BUT MODEST CARRYING COSTS

The county's debt profile is mixed. The overall debt burden relative to
market value is elevated at 5.7% due in part to the presence of 10
overlapping school districts and the general growth pressures of the
region. Offsetting debt factors include moderate overall debt on a per
capita basis at $2,471, average principal pay out of 55% in 10 years,
and limited debt plans. Fitch also notes the county's modest debt
service tax rate of $0.05 per $100 TAV. Future debt plans are modest,
comprised of $4 million in pass-through toll road and limited tax bonds
for the completion of the SH 550 project.

The county provides retirement benefits through the Texas County and
District Retirement System, a statewide agent multiple employer defined
benefit pension plan. As of Dec. 31, 2012, the published funded ratio
totaled a strong 88%. The Fitch-adjusted funded ratio, based on a 7%
rate of return, is estimated at a still solid 80%. Fitch notes that the
county typically exceeds its annual required contribution. Total
carrying costs, including debt service, pension ARC, and other
post-employment benefit (OPEB) pay-go, is modest at 6.6% of governmental
spending in fiscal 2013.

In addition to the sources of information identified in the
Tax-Supported Rating Criteria, this action was additionally informed by
information from Creditscope, University Financial Associates, and IHS
Global Insight.

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